Last tough Budget in 2015 but don't expect bonanza then, says watchdog
AUSTERITY will likely end in two years' time, the Government's budgetary watchdog has claimed. The Fiscal Advisory Council said Budget 2015 would be the last tough Budget, but stressed there wouldn't then be a "bonanza" in government spending.
It comes after the council warned against any let-up in austerity to meet troika targets amid calls to ditch the policy of steep tax hikes and spending cuts to tackle the debt crisis.
Council member Sebastian Barnes said we had two years left of tough measures. "It wouldn't become a bonanza but it's when the really tough period would stop," Mr Barnes told the Oireachtas Finance Committee.
"At that point you could envisage some things like spending increasing in line with inflation. We'd be out of the really difficult phase."
Earlier this week, the head of the council, Professor John McHale, warned against relaxing Budget plans for the next two years even though the Government is beating its targets.
Prof McHale said sticking with the austerity plan could provide a buffer when the state exits the bailout and taps into the international money markets on a full-time basis. He said yesterday that Budget 2015 would be the last of the austerity Budgets.
The Government must meet a target of cutting the budget deficit below 3pc of the entire value of the economy by 2015. Last year the figure was reduced to 7.6pc, with 7.4pc predicted this year.
The Government is looking to save another €5.1bn over the next two years. Prof McHale said that there is still a one-in-three chance of not meeting the target even if we stick with the austerity plan.
"Not following through on the planned adjustments is a risk not worth taking," he said.
Fellow council member and former IMF deputy director Donal Donovan said that while cuts and tax hikes had been tough, they weren't at the draconian side of the scale.
"In fact it would be somewhat in the middle," he said.
Although people may feel it's been frontloaded, you can argue that it actually hasn't been that much frontloaded," he said.